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Growing The Energy Efficiency Market

The popular press hasn't publicized it at all, but the consumption of energy in the United States has been cut in half since 1970, at least by one major measure. U.S. energy consumption -- as measured per dollar of economic output -- will have been slashed by the end of 2008 to half of what it was in 1970, from 18 thousand BTUs to about 8.9 thousand BTUs, according to the American Council for an Energy Efficient Economy (ACEEE).

And yet, "Our nation is not aware of the role that energy efficiency has played in satisfying our growing energy-service demands," states a recent ACEEE report entitled, The Size of the U.S. Energy Efficiency Market: Generating a More Complete Picture. "The contributions of energy efficiency often remain invisible." The report questions why, if efficiency is a proven resource, it still remains underdeveloped, and concludes, "The evidence suggests that efficiency can make an even larger contribution toward stabilization of energy prices and reducing greenhouse gas emissions -- should we choose to fully develop it."

Major support for the report was provided by the Civil Society Institute (CSI), with additional support provided by the Kendall Foundation and the North American Insulation Manufacturers Association.

Key findings of the report include:

The U.S. can potentially reduce energy consumption by an additional 25% to 30% or more over the course of the next 20 to 25 years through strategic use of energy efficiency technologies.

Since 1970 energy efficiency has met about three-fourths of the demand for new energy-related services, with the remaining one-fourth covered by conventional energy supply.

Investments in more energy efficient technologies could ultimately result by 2030 in an efficiency market worth more than $700 billion -- and total additional investments over the period 2008-2030 of nearly $7 trillion.

According to John Laitner, director of economic analysis and co-author of the report, "The greatest American success story in dealing with energy in recent decades is also the least understood and the most invisible. Energy efficiency is among the most cost-effective solutions available to consumers, businesses, policymakers and investors. Energy efficiency has made great strides, but we need to look at picking up the pace. The energy-related challenges of the 21st century require a dramatic shift -- from an emphasis on energy use to an emphasis on energy efficiency."

University of Texas professor Lloyd Jeff Dumas describes the energy efficiency initiatives as "buying time that America needs to develop new clean energy sources that will reduce the greenhouse gases linked to global warming." (Dumas also serves as chair of CSI's Working Group on the Economic and Global Warming.) "This study sends a powerful message that members of the public, elected officials and corporations need to squeeze out even more of the potential of energy efficiency as part of a comprehensive energy strategy that looks to our future, rather than our past."

The report shows that the size of energy efficiency investment varies considerably across U.S. sectors. In the buildings sector, for instance, investment in energy efficiency totaled about $178 billion in 2004, accounting for nearly 60% of all such investments. Nearly half (49%) were in energy-efficient commercial building structures, with another 22% in residential structures.

In the industrial sector, investments reached roughly $75 billion in 2004, representing one quarter of total efficiency investments. In the transportation sector, investments represented approximately 11% of total efficiency investments, or $33 billion in 2004.

Although the buildings sector accounts for 39% of total U.S. energy consumption, it received 62% of total efficiency investments. Investments in appliances and electronics (48%) greatly exceeded the proportion of energy consumed by these devices (8%). In the industrial sector, the proportion of investments (25%) was lower than the proportion of energy use (39%). As for the transportation sector, it accounted for 28% of overall energy use.